Leonard Wagenaar is a director at EY UK office, visible as M&A, PE and international tax expert. He was with PWC for 9 years, was also working for a bank, two private equity funds and his own consulting. The following is a short reflection of the nice chat we had for Episode 32 of the Tax Stories podcast.

The art of LinkedIn posts

Probably what makes Leonard even more unusual and interesting to follow is that he has a degree in philosophy and in history. And one can feel that his posts on LinkedIn stand out, like small pieces of art, linked to music, languages, travels, etc. For example, he made playlists on Spotify on BEPS, on DAC6, on taxation of the digital economy.

Two rules of Dutch CIT

Leonard likes the Dutch tax code, because it’s short. Basically, the CIT system boils down to two main rules. First, all profits coming from a business should be taxed. Second, you should follow the best market practice on allocating two different years. Because of those simple rules the whole infrastructure grew around that, starting from WWII. Lately the situation has changed there where an opinion of a tax advisor is potentially suspicious of a tax avoidance.

The importance of being fully present

Mindfulness is the recipe Leonard suggests to combine both being good at work and at home for the family. People have different ways of achieving that. Leonard tried meditation, but he realised it was not for him. Leonard also generously shared his feelings how one may look for inner peace or paradise as was suggested in the epic movie the Beach. He beautifully says that it’s like walking in a forest and suddenly finding an open place within it. At the end of the chat Leonard relates the same importance of being present in relation to meaning of life – when life happens, are you around or just making plans or doing something else that is not that important?

Good for advisors, but not for the society

The global tax changes just make things more complex, but not necessarily better. Especially Leonard is worried about the new EU initiative to tackle enablers of aggressive tax avoidance, because the borders of avoidance etc definitions are not well defined. For example, many clients are asking for advice of not being tax registered in some country, so tax advisors then explain dos and don’ts to make sure the unintended consequences do not happen. Is that avoidance? All that the tax advisors there do is just help navigating difficult mine-field, but someone may claim that the advice helps avoiding to pay tax in country X. What is acceptable tax planning?

PE because of having a phone in your pocket?

Nobody is claiming this yet, but what’s the difference now between a fixed place of business (one of the criteria for having a permanent establishment) by having a desk and PC or just a phone instead? It might be fixed, if it stays in the same geographic area. The PE concept has been around for more than 100 years, but Leonard cannot think of any immediate killer argument against this thought.

Holding companies may need to restructure

The main question here is – which country here is entitled to the withholding taxes. No withholding taxes (Estonian and Latvian CIT model) does not seem like a solution. The tax treaty system that allows different withholding tax rates better needs to be reformed e.g. by adjusting the rates, rather than imposing new anti-avoidance rules upon the old ones. Some withholding taxes are paid just because of too heavy compliance burden for claiming the exemption.